A quarter (25%) of over 55s — equivalent to 5.2 million — do not know if their estates will get charged inheritance tax, new research by Canada Life reveals.
Despite inheritance tax only presently affecting around 4% of estates, almost three in 10 UK adults (28%) believe their estate will be taxed upon death, and a similar number - one in five (22%) - are worried about the prospect of this.
Planning concerns
When it comes to planning to leave an inheritance, ensuring that the correct people benefitted from their estate (19%) was the top concern. This was followed by current or future care expenses and the impact this has on their estate (13%). The same proportion (13%) were concerned about being able to leave a financial legacy at all, or openly discussing this with family members to avoid misunderstandings (also 13%).
Stacey Love, tax and estate planning specialist at Canada Life, comments: “Whilst inheritance tax currently affects around 4% of estates, house prices have increased significantly over the past 30 years or so, and the various tax thresholds remain frozen until 2028 at the earliest. If you have any uncertainty as to whether you’ll be caught in the inheritance tax net, it’s worth thinking about your overall wealth including the current value of your home.”
Even though many do not know if their estate will be taxed, two-thirds (63%) of those aged 55 or over also say they do not plan to seek financial advice to understand the tax implications. Of those who are worried about the prospect of their estate paying inheritance tax, the top three related concerns were losing too much of their estate to tax, the legalities involved and understanding the process (38%, 29% and 27% respectively).
Stacey Love continues:
“Our research also shows that, in the past five years, more than a quarter of beneficiaries (28%) received an inheritance directly from a trust or as a combination of a trust distribution and a bequest from an estate. Choosing the right trust as part of your financial estate planning strategy is not only about managing any tax liability, it is also an appropriate way to control who benefits from your estate, to what extent they can benefit and at what age.
“Ultimately, estate planning is about putting your affairs in order, to help make the lives of your loved ones easier. While it might feel like an uncomfortable step to take, it is important to start planning ahead and consider speaking with a financial adviser to take advantage of opportunities which may be available to mitigate any inheritance tax as well as future proofing your estate planning for the next generation.”
ENDS
Notes to editors
- Survey conducted by Opinium among a nat rep sample of 2000 UK adults between 9th and 13th February 2024
- Gov.uk, How Inheritance Tax works: thresholds, rules and allowances
Enquiries:
Press enquiries should be directed to:
Elle McAtamney, Canada Life, 07913 568213, elle.mcatamney@canadalife.co.uk
About Canada Life
Canada Life is part of a group of companies controlled by Great-West Lifeco Inc., a diversified financial services holding company headquartered in Winnipeg, Canada. Through its subsidiary companies, Great-West Lifeco has operations in Canada, the United States, and Europe. Great-West Lifeco and its insurance subsidiaries have received strong ratings from major rating agencies. Great-West Lifeco has over 38 million customers worldwide and £1.532trillion assets under administration (as at 31 December 2022).
Canada Life Limited began operations in the United Kingdom in 1903 and looks after the retirement, investment and protection needs of individuals and companies alike. As well as providing stability and security through its individual contracts, Canada Life Limited has grown and maintained its position as the market leading provider of group insurance solutions.1 Canada Life acquired Retirement Advantage on 3rd January 2018 for an undisclosed sum. The acquisition added over 30,000 retirement income and equity release customers and more than £2 billion of assets under management including a £1.5 billion block of in-force annuities to Canada Life.
Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority. Canada Life International Assurance Limited and Canada Life International Assurance (Ireland) DAC are authorised and regulated by the Central Bank of Ireland.
Stonehaven UK Limited, registered in England and Wales no. 05487702. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA.
Stonehaven UK Limited is authorised and regulated by the Financial Conduct Authority.
- Canada Life MI & Swiss Re, 2022